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EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is entered
into as of September 18, 1997, between Paradigm Music Entertainment Company, a
Delaware corporation ("Borrower"), and TCI Music, Inc., a Delaware corporation
("Lender").
RECITAL
Pursuant to the letter agreement dated as of the date of this
Agreement between Lender and Borrower (the "Letter Agreement"), Lender has
agreed to lend to Borrower, and Borrower desires to borrow from Lender, up to
$3,833,169 on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which hereby are acknowledged, the parties agree as
follows:
ARTICLE 1
Definitions
The following terms have the meanings indicated for purposes
of this Agreement:
1.1 "Business Day" means a day when banks in New York, New
York and Denver, Colorado are open for business.
1.2 "GAAP" means generally accepted accounting principles as
in effect in the United States, as set forth in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, which principles
are applicable as of the date of determination.
1.3 "Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money or with
respect to advances of any kind (including repurchase obligations), (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (d)
all obligations of such Person incurred or assumed as the deferred purchase
price of property or services (other than accounts payable to suppliers incurred
in the ordinary course of business and paid in the ordinary course of business
of such Person), (e) all indebtedness of others secured by (or for which the
holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed by such
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Person, (f) all capitalized lease obligations of such Person, (g) all guaranties
of such Person and (h) all obligations of such Person as an account party in
respect of letters of credit and bankers acceptances.
1.4 "Legal Requirements" means all legal requirements in
effect from time to time, including all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
notices, demand letters, directions and requirements of all governments,
departments, commissions, boards, courts, authorities and agencies, ordinary or
extraordinary, including any change in any law, regulation or the interpretation
thereof by any governmental authority (whether or not having the force of law).
1.5 "Lien" means any lien, security interest, pledge,
mortgage, deed of trust, encumbrance, right of first refusal or other right to
purchase or any right or claim in the nature of any of the foregoing.
1.6 "Loan" means the loan by Lender to Borrower described in
Section 2.1.
1.7 "Material Adverse Effect" means a material adverse effect
on (i) the business, assets, operations, prospects or financial condition of
Borrower, (ii) the ability of Borrower to satisfy the Obligations in accordance
with their terms or (iii) the enforceability of Borrower's obligations under
this Agreement or the Note.
1.8 "Maturity Date" means the date on which the outstanding
principal and accrued interest on the Note becomes due.
1.9 "Obligations" means the Loan and any other loans,
advances, debts, interest, liabilities, obligations, fees, expenses, covenants
and duties owing to Lender by Borrower, of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument.
1.10 "Person" means any human being or any corporation,
partnership, trust, association, governmental authority or other entity or
organization.
1.11 "Potential Default" means any event or condition which
with notice, passage of time or a determination by Lender, or any combination of
the foregoing, would constitute an Event of Default.
Any capitalized term that is used but not defined in this
Agreement will have the meaning ascribed to it in the Letter Agreement.
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ARTICLE 2
Loan and Note
2.1 Loan.
(a) Subject to the terms and conditions of this
Agreement, from time to time during the period beginning on the date of this
Agreement and ending on December 31, 1997, Lender will make the Loan to Borrower
in the aggregate principal amount of up to $3,833,169 by advancing funds to
Borrower from time to time as provided in this Section 2.1 (each an "Advance
Date"). Each request by Borrower for an advance will state the principal amount
requested to be disbursed and will be accompanied by (i) a certificate of
Borrower signed by its Chief Executive Officer certifying that the conditions to
the obligation of Lender to make such advance, as set forth in Article 3, will
be satisfied as of the Advance Date and (ii) the other items prescribed by
Article 3. Lender will advance to Borrower $2,183,169 of the Loan within two
Business Days after the execution of this Agreement if such certificate and
other items are delivered to Lender on this date. On the first Business Day of
October, November and December 1997 Lender will advance to Borrower, upon the
receipt of such certificate and other items, amounts agreed by Lender and
Borrower, but not to exceed $550,000 per month, for normal operating expenses
payable during those months if Lender receives a request for such advance at
least three Business Days before such Advance Date. Notwithstanding any other
provision of this Agreement or the Note, no advance under the Loan will be
requested by Borrower or made by Lender after the Effective Time.
(b) Borrower's obligation to repay the Loan
will be evidenced by a promissory note (the "Note") in the form attached as
Exhibit A, which Borrower will execute and deliver to Lender on the date of this
Agreement.
2.2 Payments. All payments on the Note will be made and
applied as stated therein. Amounts repaid by Borrower may not be reborrowed.
ARTICLE 3
Conditions Precedent
The obligation of Lender to make the Loan (or any advance
thereof) will be subject to the satisfaction, on the date of this Agreement and
on each Advance Date, of the following conditions:
3.1 Reports, Certificates and Other Information. Lender will
have received such instruments or documents as Lender may reasonably request
relating to the existence and good standing of Borrower, Borrower's authority
for execution, delivery and performance of this Agreement and the creation and
perfection of the security interest created hereby.
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3.2 No Default. No Event of Default or Potential Default will
exist.
3.3 Representations and Warranties Correct; Compliance with
Covenants. The representations and warranties set forth in Article 4 will be
true and correct in all material respects and Borrower will have complied in all
material respects with its covenants and agreements in this Agreement.
3.4 No Material Adverse Effect. Since July 1, 1997, no event
will have occurred that has had, or reasonably could be expected to have, a
Material Adverse Effect except as disclosed in Amendment No. 1 to the
Registration Statement on Form SB-2/A (File No. 333-23781) filed by Borrower
with the Securities and Exchange Commission and any decrease in Borrower's
working capital consistent with the decreases experienced in recent periods.
3.5 Verification of Use of Proceeds; Security. Borrower will
have provided to Lender evidence satisfactory to Lender as to the compliance by
Borrower with its covenant in Section 5.6 as to each advance of the Loan and
evidence of Borrower's compliance with Section 4.11.
ARTICLE 4
Representations and Warranties of Borrower
To induce Lender to enter into this Agreement and to make the
Loan, Borrower makes the following representations and warranties to Lender:
4.1 Due Organization. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Delaware.
4.2 Chief Executive Office. The chief executive office of
Borrower is at 00 Xxxxxx Xxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
4.3 Corporate Power. Each of Borrower and SonicNet and Demon
(as defined in Section 8.1) has all corporate power necessary to own and operate
its properties and to carry on its business as now conducted and to execute and
deliver, and to perform its obligations under, this Agreement, the Note and the
other instruments and agreements to be executed and delivered by Borrower
pursuant to this Agreement.
4.4 Authorization. All corporate action on the part of
Borrower necessary for the execution, delivery and performance of this Agreement
and the Note has been duly taken and is in full force and effect. The officer
executing this Agreement and the Note on behalf of Borrower is fully authorized
to execute and deliver the same.
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4.5 Binding Nature. This Agreement and the Note are legal,
valid and binding obligations of Borrower, enforceable in accordance with their
terms, except as affected by bankruptcy, insolvency or similar laws and by
general equitable principles.
4.6 Litigation and Contingent Liabilities. There is no action,
suit, investigation or proceeding pending or, to the best of Borrower's
knowledge, threatened in writing against or affecting Borrower, SonicNet or
Demon or any of their property, the adverse determination of which reasonably
could be expected to have a Material Adverse Effect.
4.7 No Event of Default. No Event of Default or Potential
Default has occurred and is continuing or would result from the execution,
delivery and performance by Borrower of this Agreement or the Note.
4.8 Compliance With Laws; Consents. Each of Borrower, SonicNet
and Demon is in compliance in all material respects with all Legal Requirements
applicable to it or to its assets and business. No approvals by, or filings
with, any Person are required to be obtained or made in connection with the
execution and delivery of this Agreement or the Note, the consummation of the
transactions herein or therein contemplated or the performance of or compliance
with the terms and conditions hereof or thereof.
4.9 Absence of Conflicts. The execution, delivery and
performance of this Agreement and the Note will not (a) violate any Legal
Requirement, (b) conflict with or result in a breach of or a default under any
agreement or instrument to which Borrower is a party or by which any of its
properties is bound or (c) result in the creation or imposition of a Lien upon
any property (now owned or hereafter acquired) of Borrower, except for the
security interest granted hereby.
4.10 Title and Authority. Borrower has all rights in and good
title to the Collateral and has full power and authority to grant to Lender a
security interest in the Collateral pursuant to this Agreement and to execute,
deliver and perform its obligations in accordance with this Agreement, without
the consent or approval of any other Person other than any consent or approval
which has been obtained. The Pledged Shares (as defined in Section 8.2)
represent all of the issued and outstanding capital stock of Demon and SonicNet
and 25% of the issued and outstanding capital stock of Wingnut, are duly issued,
fully paid and nonassessable and are not subject to any Lien (except that the
shares of Wingnut owned by Borrower currently are held in escrow).
4.11 Pledged Stock; Filings. On the date of this Agreement
Borrower has delivered to Lender certificates evidencing all of the Pledged
Shares (other than the certificates representing the shares of Wingnut, which
will be delivered to Lender upon the release thereof from escrow), together with
stock assignments or powers in form acceptable to Lender. Executed Uniform
Commercial Code financing statements describing the Collateral have been filed
of record in every governmental office in which such filing is necessary to
establish a legal, valid and perfected security interest in favor of Lender in
respect of the Collateral in which a security interest may be perfected
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by filing, and no other filing, refiling, recording, rerecording, registration
or reregistration is necessary in any such jurisdiction, except as provided
under applicable law with respect to the filing of Uniform Commercial Code
continuation statements.
4.12 Priority of Security Interest. The Collateral is and will
be owned by Borrower free and clear of any Lien other than the security interest
granted hereby. The security interest granted to Lender in this Agreement is a
legal, valid and perfected first priority security interest subject to no prior
Lien of any nature.
ARTICLE 5
Affirmative Covenants
Borrower will comply with the following provisions and with
its covenants set forth in the Letter Agreement so long as any Obligation is
outstanding:
5.1 Accounting Records. Borrower will maintain books and
accounts in accordance with GAAP. Within 45 days after the end of each of the
first three quarters of each fiscal year until the Maturity Date, Borrower will
deliver to Lender a copy of consolidated financial statements for such quarter
(consisting of at least a balance sheet and related statements of operations,
cash flows and stockholders equity), and within 90 days after the end of each
fiscal year until the Maturity Date Borrower will deliver a copy of audited
consolidated financial statements for such fiscal year (consisting of at least a
balance sheet and related statements of operations, cash flows and stockholders
equity). All such financial statements will be prepared in accordance with GAAP
applied on a basis consistent with prior periods (except as otherwise noted
therein) and Regulation S-X under the Securities Exchange Act of 1934, as
amended.
5.2 Corporate Existence. Borrower will preserve and maintain
its corporate existence and that of Demon and SonicNet and all its licenses,
privileges and franchises and other rights necessary or desirable in the normal
course of its businesses, except to the extent that the failure to preserve and
maintain its corporate existence and such rights would not be reasonably likely
to have a Material Adverse Effect.
5.3 Qualifications To Do Business. Each of Borrower, SonicNet
and Demon will qualify to do business and will be and remain in good standing in
each jurisdiction in which the nature of its business requires it to be so
qualified, or in which failure to be so qualified and in good standing would be
reasonably likely to have a Material Adverse Effect.
5.4 Compliance With Laws. Each of Borrower, SonicNet and Demon
will comply with all applicable Legal Requirements, except where the failure to
do so would not have a Material Adverse Effect.
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5.5 Taxes and Other Liabilities. Borrower will pay and
discharge when due any and all Indebtedness and all taxes and assessments except
as may be subject to good faith contest or as to which a bona fide dispute
exists.
5.6 Use of Proceeds. Borrower will use the proceeds of the
Loan only for the purposes described in Schedule A to the Letter Agreement.
5.7 Protection of Security. Borrower will, at its own expense,
take any and all actions necessary to defend title to the Collateral against all
Persons and to defend the security interest of Lender in the Collateral and the
priority thereof, against any adverse Lien of any nature whatsoever.
5.8 Continuing Obligations of Borrower. Borrower will observe
and perform all the material conditions and obligations to be observed and
performed by it under each contract, agreement, interest or obligation relating
to the Collateral, all in accordance with the terms and conditions thereof.
5.9 Indemnification. Borrower will indemnify and hold Lender
and Lender's directors, officers, employees, affiliates, attorneys and agents
(collectively, the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of
counsel) which may be imposed on, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of any breach by Borrower
of any of its representations, warranties, covenants or agreements in this
Agreement or the Note (collectively, the "Indemnified Matters"); provided,
however, that Borrower will have no obligation to an Indemnitee under this
Section 5.9 with respect to Indemnified Matters to the extent such Indemnified
Matters were caused by or resulted from the gross negligence or willful
misconduct of an Indemnitee.
ARTICLE 6
Negative Covenants
Borrower will comply with the following provisions so long as
any Obligation is outstanding:
6.1 No Merger, Etc. Borrower will not effect or enter into any
agreement to effect any merger, consolidation, reorganization, recapitalization
or similar transaction other than as contemplated by the Letter Agreement.
6.2 Indebtedness. Borrower will not incur, assume or suffer to
exist any Indebtedness, or cause or permit SonicNet or Demon to do so, except
(a) the Loan, (b) Indebtedness
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for borrowed money and capital lease obligations outstanding as of the date of
this Agreement and reflected in the most recent balance sheet of Borrower
delivered to Lender and (c) Indebtedness for the purchase of goods or services
incurred in the ordinary course of business.
6.3 Loans and Investments. Borrower will not at any time make
or have outstanding any loan or advance to, or purchase, acquire or own any
stock, bonds, notes or securities of, or any partnership or other ownership
interest in, or make any capital contribution to, any other Person, or purchase
or acquire any assets (whether with cash or in exchange for other assets) or
make any other investment in any Person or agree, become or remain liable to do
any of the foregoing, except trade credit extended to subcontractors or
suppliers on usual and customary terms in the ordinary course of business and
except as required by the Letter Agreement.
6.4 No Transfer of Assets or Other Lien. None of Borrower,
SonicNet or Demon will sell or transfer any of the Collateral or, except for the
security interest herein granted to Lender, create, incur, assume or suffer to
exist any Lien on the Collateral.
ARTICLE 7
Events of Default
7.1 Events of Default. Each of the following will constitute
an Event of Default under this Agreement:
(a) Payments. Borrower fails to pay when due
any principal, interest or other amount due under this Agreement, the Note or
any other Obligation.
(b) Other Covenants. Borrower fails to perform
any other obligation under this Agreement, or the Note, or any other Obligation
and such failure continues uncured for a period of 10 days or more.
(c) Warranties. Any warranty or representation
made by Borrower is untrue in any material respect.
(d) Bankruptcy. Borrower (i) files a petition
seeking liquidation or reorganization under Chapter 7 or Chapter 11 of the
United States Bankruptcy Code or any similar proceeding under state or federal
law, or consents to the institution of an involuntary case thereunder against
it; (ii) applies for, or consents or acquiescences to an appointment with
respect to Borrower of, a receiver, liquidator, sequestrator, trustee or other
officer with similar powers; (iii) makes an assignment for the benefit of
creditors; (iv) admits in writing its inability to pay its debts generally as
they become due; or, (v) an involuntary case is commenced seeking the
liquidation or reorganization of Borrower under Chapter 7 or Chapter 11 of the
United States Bankruptcy Code, or any similar proceeding is commenced against
Borrower under any other applicable law, and (A)
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the petition is not timely controverted by Borrower, (B) the petition is not
dismissed within 45 days after its filing, (C) an interim trustee is appointed
to take possession of all or a portion of the property, or to operate all or any
part of the business, of Borrower or (D) an order for relief or a decree or
order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee or other officer is issued or
entered therein.
(e) Cross-Default. Borrower is in default of
any obligation (other than the Obligations) under any other agreement or
instrument for the payment of Indebtedness in excess of $10,000 and such default
continues uncured for 10 days or more.
Borrower will give notice to Lender immediately if any Event of Default or
Potential Default occurs.
7.2 Acceleration; Other Remedies. If any Event of Default
occurs, all Obligations will become immediately due and payable without
presentment, demand, protest or other notice of any kind. If any Event of
Default occurs and is continuing, Lender will have, in addition to the remedies
set forth in this Agreement, all other remedies available at law or in equity.
ARTICLE 8
Security Interest
8.1 Grant of Security Interest. To secure the prompt payment
and performance of the Obligations, Borrower hereby grants to Lender a security
interest in all of Borrower's assets and properties now owned or hereafter
acquired, including but not limited to its furniture, fixtures, equipment,
inventory, general intangibles, accounts receivable, contract rights,
instruments, capital stock in other corporations, including all issued and
outstanding capital stock of SonicNet, Inc., a Delaware corporation
("SonicNet"), Purple Demon, Inc., a New York corporation ("Demon") and Wingnut
Records, Inc. ("Wingnut"), and equity interests in partnerships and limited
liability companies (collectively, the "Collateral"), and all proceeds from the
sale, exchange, lease or other disposition of any of the Collateral.
8.2 Collections.
(a) So long as no Event of Default has occurred
and is continuing, Borrower will have the right to exercise all voting and
consent rights as the holder of the capital stock of Demon, SonicNet and Wingnut
included in the Collateral (collectively, the "Pledged Shares") and to collect
all accounts receivable included in the Collateral in the ordinary course of its
business; provided that Borrower will, if Lender will so request, (i) arrange
for remittances on any such accounts to be made in such manner as Lender may
direct, and (ii) promptly deposit all payments received by Borrower on account
of such accounts receivable, whether in the form of cash, checks, notes, drafts,
bills of exchange, money orders or otherwise, in one or more accounts designated
by Lender in precisely the form received (but with any endorsements of Borrower
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necessary for deposit or collection), subject to withdrawal by Lender only, as
hereinafter provided, and until they are deposited, such payments will be deemed
to be held in trust by Borrower for and as Lender's property and will not be
commingled with Borrower's other funds.
(b) Upon the occurrence and during the
continuance of an Event of Default, Lender will have the right, as the agent of
Borrower, with power of substitution for Borrower and in Borrower's name,
Lender's name or otherwise, for the use and benefit of Lender (i) to receive,
endorse, assign or deliver any and all notes, acceptances, checks, drafts, money
orders or other evidences of payment relating to the Collateral or any part
thereof; (ii) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Collateral; (iii) to sign the name
of Borrower on any invoice or xxxx of lading relating to any of the Collateral;
(iv) to send verifications of accounts receivable to any customer; (v) to
commence and prosecute any and all suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect or otherwise realize on
all or any of the Collateral or to enforce any rights in respect of any
Collateral; (vi) to settle, compromise, adjust or defend any actions, suits or
proceedings relating to or pertaining to all or any of the Collateral; (vii) to
notify, or to require Borrower to notify, the account debtors obligated on any
accounts receivable to make payment thereof directly to Lender; and (viii) to
use, sell, assign, transfer, pledge, make any agreement with respect to or
otherwise deal with all or any of the Collateral, and to do all other acts and
things necessary to carry out the purposes of this Agreement, as fully and
completely as though Lender were the absolute owner of the Collateral for all
purposes.
(c) Nothing herein contained will be construed
as requiring or obligating Lender to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by Lender, or to present
or file any claim or notice, or to take any action with respect to the
Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. No action taken by Lender or omitted to
be taken with respect to the Collateral or any part thereof will give rise to
any defense, counterclaim or offset in favor of Borrower or to any claim or
action against Lender. The appointment of Lender as the agent of Borrower for
the purposes set forth in this Section 8.2 is coupled with an interest and is
irrevocable. The provisions of this Section 8.2 will in no event relieve
Borrower of any of its obligations under this Agreement with respect to the
Collateral or any part thereof or impose any obligation on Lender to proceed in
any particular manner with respect to the Collateral or any part thereof, or in
any way limit the exercise by Lender of any other or further right which it may
have on the date of this Agreement or hereafter.
8.3 Remedies upon Default.
(a) Upon the occurrence and during the
continuance of an Event of Default, Borrower will deliver each item of
Collateral to Lender on demand, and Lender will have the right to take any or
all of the following actions at the same or different times: (i) with or without
legal process and with or without previous notice or demand for performance, to
take possession of
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the Collateral and without liability for trespass as to the property of Borrower
to enter any premises where the Collateral may be located for the purpose of
taking possession of or removing the Collateral; (ii) to exercise all voting and
consent rights with respect to the Pledged Shares, and to act in all other
respects as the legal and beneficial holder thereof; and (iii) to exercise any
and all other rights afforded to a secured party under the Uniform Commercial
Code or other applicable Legal Requirement. Without limiting the generality of
the foregoing, Lender will have the right, subject to applicable Legal
Requirements, to sell or otherwise dispose of all or any part of the Collateral,
at public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery as Lender deems
appropriate. As to any Collateral constituting a security, Lender will be
authorized at any such sale (if it reasonably deems it advisable to do so) to
restrict the prospective bidders or purchasers to Persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof. Upon
consummation of any sale Lender will have the right to assign, transfer and
deliver to the purchaser thereof the Collateral so sold. Each purchaser at any
sale of Collateral will hold the property sold absolutely, free from any claim
or right on the part of Borrower, and Borrower hereby waives (to the extent
permitted by applicable Legal Requirements) all rights of redemption, stay and
appraisal which Borrower now has or may at any time in the future have under any
Legal Requirement now existing or hereafter enacted.
(b) Lender will give Borrower at least 10 days'
written notice (which Borrower agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code) of Borrower's intention to sell
any Collateral. Such notice, in the case of a public sale, will state the time
and place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, will state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale will be held at
such time or times within ordinary business hours and at such place or places as
Lender may fix and state in the notice (if any) of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as Lender may determine. Lender will not be
obligated to sell any Collateral if it determines not to do so, regardless of
the fact that notice of sale of such Collateral has been given. Lender may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case any sale of all or any
part of the Collateral is made on credit or for future delivery, the Collateral
so sold may be retained by Lender until the sale price is paid by the purchaser
or purchasers thereof, but Lender will not incur any liability in case any such
purchaser or purchasers fail to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may be sold again upon like notice.
At any public sale, Lender may bid for or purchase, free (to the extent
permitted by applicable Legal Requirements) from any right of redemption, stay
or appraisal on the part of Borrower (all such rights being hereby irrevocably
waived and released by Borrower to the extent permitted by applicable Legal
Requirements), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to Lender
from Borrower as
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a credit against the purchase price, and Lender may, upon compliance with the
terms of sale, hold, retain and dispose of such property without further
accountability to Borrower therefor. As an alternative to exercising the power
of sale herein conferred upon it, Lender may proceed by a suit or suits at law
or in equity to foreclose on and to sell the Collateral or any portion thereof
pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver. Upon any
sale of the Collateral by Lender (including, pursuant to a power of sale granted
by statute or under a judicial proceeding), the receipt of Lender or of the
officer making the sale will be a sufficient discharge to the purchaser of the
Collateral so sold and such purchaser will not be obligated to see to the
application of any part of the purchase money paid over to Lender or such
officer or be answerable in any way for the misapplication thereof.
8.4 Application of Proceeds. Lender will apply the proceeds of
any collection or sale of the Collateral as follows:
(a) First, to the payment of all costs and expenses
incurred by Lender in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Obligations,
including all court costs and the reasonable fees and expenses of its
agents and legal counsel, the repayment of all advances made by Lender
hereunder on behalf of Borrower and any other reasonable costs or
expenses incurred by Lender in connection with the exercise of any
right or remedy hereunder;
(b) Second, to the payment of the Obligations; and
(c) Third, to Borrower or as a court of competent
jurisdiction may otherwise direct.
Lender will have absolute discretion as to the time of application of any such
proceeds, moneys or balances in accordance with this Agreement. Lender will have
the right to claim and collect from Borrower any deficiency remaining after the
sale of any Collateral.
8.5 Location of Collateral; Place of Business.
(a) Borrower hereby represents and warrants that
all the tangible Collateral is located at the locations listed on Schedule 8.5.
Borrower will not move any of the Collateral, or permit it to be moved, unless
all filings under the Uniform Commercial Code or otherwise which are required by
this Agreement to be made with respect to the Collateral have been made and
Lender has a valid, legal and perfected first priority security interest in the
Collateral as relocated. Upon Lender's request Borrower promptly will prepare
and deliver to Lender a certificate executed by the president of Borrower
showing the identity and location of the Collateral.
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(b) Borrower will not change, or permit to be
changed, the location of its chief executive office unless all filings under the
Uniform Commercial Code or otherwise which are required by this Credit Agreement
to be made have been made and Lender has a valid, legal and perfected first
priority security interest based on such relocated office.
ARTICLE 9
Miscellaneous
9.1 Successors and Assigns. This Agreement will be binding
upon, and the benefits thereof will inure to, the parties hereto and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights or obligations hereunder.
9.2 No Implied Waiver. No delay or omission to exercise any
right, power or remedy accruing to Lender upon any breach or default of Borrower
under this Agreement will impair any such right, power or remedy of Lender, nor
will it be construed to be a waiver of any such breach or default, or an
acquiescence therein or any similar breach or default occurring thereafter, nor
will any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring theretofore or thereafter.
9.3 Amendments; Waivers. No amendment, modification or waiver
of any provision of this Agreement will be effective unless the same is in
writing and signed by each party to be bound thereby. Any amendment,
modification or waiver hereunder will be effective only in the specific instance
and for the specific purpose for which given.
9.4 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, is found by a court
of competent jurisdiction to be unenforceable for any reason, such provision may
be modified or severed from this Agreement to the extent necessary to make such
provision enforceable against such Person or in such circumstance. Neither the
unenforceability of such provision nor the modification or severance of such
provision will affect (i) the enforceability of any other provision of this
Agreement or (ii) the enforceability of such provision against any Person or in
any circumstance other than those against or in which such provision is found to
be unenforceable.
9.5 Notices. Any notice which Borrower or Lender may be
required or may desire to give to the other under any provision of this
Agreement or the Note will be in writing, and will be deemed to have been duly
given if (a) personally delivered (including delivery by Federal Express or
other nationally recognized overnight courier) or (b) sent by confirmed telecopy
as follows:
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To Borrower:
Paradigm Music Entertainment Company
00 Xxxxxx Xxxxx Xxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telecopy: (000) 000-0000
With a copy to:
Xxxx & Priest LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telecopy: (000) 000-0000
To Lender:
TCI Music
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
will not be effective until notice of such change has been received by the other
parties.
9.6 Interpretation. This Agreement, together with the Note and
the exhibits and schedules to this Agreement, is the final expression of their
agreement with respect to the subject matter hereof and is intended as a
complete statement of the terms and conditions of such agreement.
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9.7 Governing Law. The validity, construction and effect of
this agreement will be governed by the laws of the State of Colorado, without
regard to its laws regarding choice of applicable law.
9.8 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.9 Headings. Captions, headings and the table of contents
in this Agreement are for convenience only, and are not to be deemed part of
this Agreement.
9.10 Terms. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. All pronouns (and any variation) will be deemed to
refer to the masculine, feminine or neuter, as the identity of the Person may
require. The singular or plural includes the other, as the context requires or
permits. The word "include" (and any variation) is used in an illustrative sense
rather than a limiting sense. The word "day" means a calendar day. The word
"year" means a calendar year.
9.11 Additional Waivers.
(a) Bankruptcy. If Borrower becomes insolvent or
files a petition for reorganization, arrangement, composition, discharge or
similar relief under any present or future provision of the Bankruptcy Code, or
if such a petition is filed against Borrower, to the extent that in any such
proceedings any payment of any of the Obligations previously made by Borrower to
Lender must be returned by Lender or some or all of the Obligations are
terminated, rejected, reduced or abrogated, Borrower agrees that, to the extent
permitted by applicable law, its liability to Lender hereunder will be
reinstated effective from the date of this Agreement and will continue in full
force and effect as if no such action or proceeding had occurred and as though
such payment had not been made to Lender.
(b) Statutes of Limitation. Borrower waives the
benefit of any statute of limitations affecting its liability hereunder or under
the Note or the enforcement thereof, to the extent permitted by law.
(c) Demands for Performance. Borrower acknowledges
that repeated and successive demands may be made, and payments or performance
made hereunder in response to such demands, from time to time and when Borrower
defaults in its performance of the Obligations. Notwithstanding any such
performance hereunder, this Agreement will remain in full force and effect and
will apply to any and all subsequent defaults by Borrower in payment or
performance of the Obligations.
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(d) No Set-off. Borrower waives any defense
arising by reason of any disability of Borrower. Borrower waives as against
Lender any right of setoff, defense or counterclaim which Borrower may have or
claim to have against Lender. Until such time as the Obligations have been
satisfied in full, Borrower will not have any right of subrogation, and hereby
waives any right to enforce any remedy that Lender now has or may hereafter have
against Borrower, and waives any and all statutory or other rights to
participate in any security now or hereafter held by Lender.
Borrower acknowledges that Lender would not make the Loan in the absence of the
foregoing covenants and waivers by Borrower and the other covenants and waivers
of Borrower in this Agreement.
9.12 Further Assurances. Borrower, at its expense, will
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as Lender may from time to
time reasonably request to assure and preserve the security interests and the
rights and remedies created hereby, including the payment of any fees and taxes
required in connection with the execution and delivery of this Agreement, the
granting of the security interests created hereby and the filing of any
financing statements or other documents in connection herewith. If any amount
payable under or in connection with any of the Collateral is evidenced by any
promissory note or other instrument, such note or instrument will be immediately
pledged and delivered to Lender, duly endorsed in a manner satisfactory to
Lender. Borrower will notify Lender of any change in its corporate name or in
the location of its chief executive office, its chief place of business or the
office where it keeps its records relating to the accounts receivable owned by
it. Borrower will promptly notify Lender if any material portion of the
Collateral is damaged or destroyed. Borrower promptly will take any action
appropriate to perfect Lender's first priority security interest in any
Collateral acquired by Borrower after the date of this Agreement.
9.13 Expenses. Borrower will pay all costs and expenses,
including fees and disbursements of Lender's counsel, in connection with an
Event of Default or Potential Default, the enforcement of this Agreement or the
Note and collection and other proceedings resulting therefrom. Borrower will
indemnify Lender against any transfer taxes, filing fees, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution, delivery and performance of this Agreement or the Note.
9.14 Jurisdiction and Venue. The parties hereby irrevocably
agree that any legal action or proceeding with respect to this Agreement or the
Note may be brought in any state or federal court located in the State of
Colorado or in any other court having jurisdiction over the subject matter of
such action or proceeding, and by execution and delivery of this Agreement each
party hereby irrevocably consents and submits to each such jurisdiction and
hereby irrevocably waives any and all objections which it may have as to venue
in any of the above courts. Borrower and Lender hereby waive personal service
and any and all other process, and consent that all such services of process be
made by registered or certified mail, return receipt requested, directed to the
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addresses provided for in this Agreement and service so made will be deemed to
be completed three Business Days after the same will have been deposited in the
United States mail, postage prepaid.
9.15 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS AGREEMENT OR THE NOTE, OR ANY DEALINGS BETWEEN BORROWER AND LENDER RELATING
TO THE LOAN. This waiver is intended to encompass any and all disputes that may
be filed in any court and that relate to the subject matter of this transaction,
including contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Each party acknowledges that this waiver is a
material inducement to enter into this Agreement, and that each party will
continue to rely on this waiver in any future dealings with the other. Each
party further warrants and represents that it has reviewed this waiver with its
legal counsel, and that it knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE AND
MAY BE MODIFIED ONLY IN WRITING, AND THIS WAIVER WILL APPLY TO ANY SUBSEQUENT
AMENDMENT, RENEWAL, SUPPLEMENT OR MODIFICATION OF OR TO THIS AGREEMENT. In the
event of litigation, this Agreement may be filed as a written consent to a trial
by the court.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
PARADIGM MUSIC ENTERTAINMENT COMPANY
By: /s/ Xxxxxx XxXxxxxxxx
---------------------------------
Name: Xxxxxx XxXxxxxxxx
Title: President
TCI MUSIC, INC.
By: /s/ Xxxxx X. Xxxx
---------------------------------
Name: Xxxxx X. Xxxx
Title: President
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SCHEDULE 8.5
LOCATION OF COLLATERAL
00 Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Sonic Net
000 Xxxxxxxx
Xxx Xxxx, XX 00000
SonicNet - Addicted to Noise
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
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PROMISSORY NOTE
$3,833,169 September 18, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, Paradigm Music Entertainment Company, a
Delaware corporation ("Maker"), promises to pay to the order of TCI Music, Inc.,
a Delaware corporation ("Holder"), at 0000 XXX Xxxxxxx, Xxxxxxxxx, Xxxxxxxx
00000 or at such other place as from time to time may be designated by Holder to
Maker in writing, the principal sum of $3,833,169 (or such lesser amount as is
loaned to Maker by Holder under the Loan Agreement, as defined below) plus
interest at the rate of 10% per annum, compounded annually. Interest shall be
computed and paid based on the actual number of days elapsed in a year
consisting of 365 (or 366, if applicable) days.
The principal of and accrued interest on this Note shall be
due and payable in lawful money of the United States of America on (a) December
31, 1997 if either the Merger Agreement (as defined in the letter agreement
dated September 18, 1997 between Maker and Holder) terminates without
consummation of the merger described therein or prior to the effective time of
such merger any condition to the obligation of Holder to consummate such merger
fails (or it is evident that any such condition will not be satisfied) or (b) if
the merger is consummated, June 30, 1998.
Maker shall have the right to make prepayments, in whole or in
part at any time and from time to time, of the unpaid balance and accrued
interest hereof, free of premium or penalty. All prepayments shall be applied by
Holder first to any costs or expenses, including, without limitation, reasonable
attorneys' fees and costs incurred by Holder in enforcing Holder's rights under
this Note, then to interest accrued hereon and then to the remaining outstanding
principal balance hereof.
This Note is secured pursuant to the Loan and Security
Agreement of even date herewith between Maker and Holder (the "Loan Agreement").
Time is of the essence hereof. Maker will be in default under
this Note upon the occurrence and continuance beyond any applicable cure period
of an Event of Default, as defined in the Loan Agreement. Upon any Event of
Default, all unpaid principal of and accrued interest on this Note shall become
at once due and payable automatically and without notice and the unpaid balance
of this Note shall from that date forward bear interest at 11% per annum,
compounded quarterly, until fully paid.
Maker agrees to pay all costs of collection of this Note,
including reasonable attorney's fees, whether suit is brought or not, including
fees associated with bankruptcy and appellate proceedings.
Maker, for itself and its successors and assigns, expressly
waives presentment, demand, protest, notice of dishonor, notice of nonpayment,
notice of maturity, notice of protest,
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presentment, presentment for the purposes of accelerating maturity, diligence in
collection, and the benefit of any exemption under any exemption or insolvency
laws. Holder, without notice, may release or surrender, exchange or substitute,
any property now held or which may hereafter be held as security for the payment
of this Note, may extend the time for payment or otherwise modify the terms of
payment of any part or the whole of the debt evidenced hereby, and may renew
this Note.
The exercise or non-exercise by Holder of any rights or
remedies hereunder shall not preclude Holder's exercise of any other rights or
remedies provided herein, in the Loan Agreement or by law or equity. The failure
of Holder at any time to exercise any rights or remedies hereunder shall not
constitute a waiver of the right to exercise the same or other remedies at any
other time.
This Note may not be changed, altered, modified or terminated
orally, but only by agreement or discharge in writing signed by Maker and the
holder of this Note at the time of any such change, alteration, modification or
discharge.
In no event shall the amount paid or agreed to be paid to
Holder as interest hereunder exceed the highest lawful rate permissible under
applicable law. If, due to any circumstance, the interest payable hereunder is
deemed to exceed the highest rate of interest permitted by applicable law, then
the interest payable hereunder shall be reduced to the maximum rate so
permitted. If Holder shall ever receive interest on this Note which would exceed
the highest lawful rate, the interest which would be excessive shall be applied
to the reduction of the principal balance remaining unpaid and not to the
payment of interest. This provision shall supersede all contrary agreements
between Maker and Holder with respect to the calculation and payment of interest
on this Note.
Any reference in this Note to "Holder" will be deemed to
include any successor or assign of Holder.
If the last day for the making of any payment or the taking of
any other action is not a day on which banks in Denver, Colorado are open for
business, the time for making such payment or taking such action will be
extended to the next business day.
The provisions of this Note shall be construed and interpreted
and all rights and obligations of the parties hereunder determined in accordance
with the laws of the State of Colorado without regard to any choice of law
principles. At the option of Holder, an action may be brought to enforce this
Note in any court located in the State of Colorado, or in any other court in
which venue and jurisdiction are proper. Maker irrevocably consents to venue and
jurisdiction in the state and federal courts located in the State of Colorado
and to service of process by mail in any such action. Maker further consents to
the bringing of an action to recognize and enforce any judgment rendered by the
above courts in any jurisdiction in which Maker has assets or may be found, and
irrevocably waives, to the full extent permitted by law, any defense based on
lack of jurisdiction or inconvenience of forum.
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IN WITNESS WHEREOF, Maker has signed and delivered this Note
the day and year first above written.
PARADIGM MUSIC ENTERTAINMENT COMPANY
By: /s/ Xxxxxx XxXxxxxxxx
---------------------------------
Name: Xxxxxx XxXxxxxxxx
Title: President
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